Free MarketPoliticsTradeWork

Does the UK have the skills to negotiate a trade deal?

Source: janeb13

The Leave campaign argued the EU infringed on the UK’s power to make free trade deals (Vote Leave, 2016). This is largely true, EU membership prohibits the UK from signing any trade deals meaning all deals will have to be signed post-Brexit (Driffield, 2017). Trade deals are agreements over the extent of which two countries can access each other’s markets. They can introduce tariffs, quotas, and be multifaceted (Driffield, 2017). Whilst free trade hypothetically seems feasible. Countries would only agree if they have a trade export surplus to the UK (Driffield, 2017) this shrinks the list of countries who will be open to these low tariff agreements. Driffield (2017) argues the negotiating part of a trade deal is not the most difficult part, what is most difficult is deciding which industries benefit, and which lose out. Not having enough experts to advise on the intricacies of sectors could leave the UK susceptible to making agreements which harm the economy in the long run.

The UK used to have many ‘sector experts’ individuals who had in-depth specialist knowledge of their sector. But this job has been fulfilled by the EU for the last 25 years. This leaves the current civil service unable to fill this space (Driffield, 2015). A lack of sector experts leaves the UK at a knowledge disadvantage when it comes to negotiating with the EU. In comparison to the UK’s skills deficit, the European commission tends to have 20 commission negotiators backed by 25-40 experts. As the process grows more sophisticated achieving an agreement in 5 years is often difficult. To compound this issue, most of the British individuals skilled to do this role work at the European Commission (Durantez, 2016). Post-Brexit, the UK has to renegotiate every trade deal acquired through the EU, who go into negotiations with a good offer of giving a country access to 500million customers (Durantez, 2016).

As a member of the EU, the UK benefits from 80 EU trade and regional agreements, the terms of these deals tend to be more favourable than WTO terms. 15 countries (including the US, Brazil & Japan) are currently negotiating deals (Durantez, 2016). Durantez (2016) argues it would take 500 negotiators working for a decade to acquire all the agreements currently in place. This work wouldn’t be to acquire new trade agreements but to maintain the current agreements in place (Durantez, 2016).

Whitehall has confirmed that 10 countries are already lined up to do trade deals. These include India, China, Japan, Australia, and Canada (Giannangeli, 2016). Donald Trump has promised a quick trade deal but the earliest this could take place would be in 2019 (Bloom, 2017). As these negotiations are not currently at the formal stage any speculation of their terms isn’t feasible. Those in the current cabinet also lack the skills to facilitate international trade negotiations (Durantez, 2016). Making it more likely the process won’t be as fast or smooth as desired.

One of the main arguments put forward by the leave campaign was that once the UK left the EU it would be able to create ties with other countries, in turn, boosting the economy (Vote Leave, 2016). Leave.Eu argues ‘the nature of global trade has changed beyond recognition since Britain joined the EEC’ and that countries such as Canada, Australia, and New Zealand have a desire to sign trade deals (Leave.EU, 2017). The UK is the 9th largest export economy in the world (OEC, 2016) so countries should be more than happy to sign agreements, but this also is more complicated than it sounds. It is true that the world economy has changed much since Britain joined the EEC. In today’s world, the BRICS nations; Brazil, Russia, India, China and South Africa are forecasted to experience sustained growth for the next few decades (Sengupta, 2016). The group of nations gains strength in terms of the size of their resources and combined GDP. Yet the sharp fall in the price of commodities has left some of the countries facing economic problems (Sengupta, 2016). Brazil struggles with corruption and misuse of state finance, oil is Russia’s main export and prices have fallen, and in China growth has slowed (Sengupta, 2016). Of all the BRICS nations Britain exports most to China, exports to China accounted for 6.5% of all British exports in 2015 (OECD, 2016b).

Whilst it may benefit the UK in the long run to have trade agreements with the BRICS nations, most British exports go to countries who are in the EU (OECD, 2016b). When it comes to trade a country’s, economic size is expected to have a positive effect on bilateral flows while distance is expected to have a negative effect by incurring a whole range of extra trade costs including language bureaucracy, culture etc (Bruno et al, 2016). When it comes to imports, the EU is also the main source of origin. This makes sense and fits the gravity model which highlights the potential for trade when two countries are geographically close (Bruno et al, 2016). More than 50% of the imports which end up in the UK come from Europe (OECD, 2016b).

 

By Shaneka Knight

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References

Bloom, J. 2017, Reality Check: Can there be a quick UK-USA trade deal. BBC, [online] 16 January. Available at: <http://www.bbc.co.uk/news/business-38639638> [Accessed 15 August. 2017].

Bruno, R., Campos, N., Estrin, S., and Tian, M, 2016. Foreign Direct Investment and the Relationship Between the United Kingdom and the European Union. [pdf]. London: Centre for Economic Performance. Available at: <http://cep.lse.ac.uk/pubs/download/dp1453.pdf> [Accessed 21 August. 2017].

Driffield, N, 2017. Trade deals are difficult to negotiate and Britain lacks the skills for the job, The Conversation [online] 27 January. Available at: <http://theconversation.com/trade-deals-are-difficult-to-negotiate-and-britain-lacks-the-skills-for-the-job-71580> [Accessed 23 August. 2017].

Durantez, G. M, 2016. Britain lacks the skills to go solo on trade deals, The Financial Time [online]. Available at: <https://www.ft.com/content/3c76e90a-270e-11e6-8ba3-cdd781d02d89> [Accessed 23 August. 2017].

Giannangeli, M, 2016. UK has 10 trade deals with economic powerhouse, The Express [online] 18 July. Available at: <http://www.express.co.uk/news/politics/690191/Britain-ten-Brexit-trade-deals-lined-up-economic-powerhouses> [Accessed 3 September. 2017].

Leave.EU, 2017. Trade. [online] undated. Available at: <http://leave.eu/trade/> [Accessed 27 August. 2017].

OECD, 2016b. United Kingdom. [online]. Available at: <http://www.oecd.org/unitedkingdom/> [Accessed 5 September. 2017].

Sengupta, J. (2016). Future of the BRICS. [online]. Observer Research Foundation. Available at: <http://www.orfonline.org/research/future-of-the-brics/> [Accessed 3 September. 2017].

Vote Leave, 2016. Why Vote Leave. [online] undated. Available at: <http://www.voteleavetakecontrol.org/why_vote_leave.html> [Accessed 25. August 2017].

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